Step 6: Calculate the debt deductions disallowed

The entity's maximum allowable debt is the greater of the:

safe harbour debt amount from steps 2 and 3

arm's length debt amount from step 4

worldwide gearing debt amount from step 5.

You do not necessarily have to calculate all amounts. If you do not want to calculate an arm's length debt amount or worldwide gearing debt amount, you can use the safe harbour debt amount as your maximum allowable debt.

If the entity's adjusted average debt is more than its maximum allowable debt, a proportion of its debt deductions cannot be deducted. Table 36: Non-ADI financial inward investment vehicle's step 6 and Worksheet 28: Non-ADI financial inward investment vehicle's step 6 work out the proportion disallowed.

the debt capital that gives rise to debt deductions in that year or any other income year; this is the amount calculated at A in Worksheet 22: Non-ADI financial inward investment vehicle's step 1, see step 1.1

the entity's cost-free debt capital that is included in its adjusted average debt; this is the amount calculated at D in Worksheet 22: Non-ADI financial inward investment vehicle's step 1 – see step 1.4

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